Aco will receive a grant (the “Government Assistance”), described under s. 12(1)(x)(iv), from a Crown corporation for the purpose of creating or repairing affordable housing. Aco may use the Government Assistance only for the purposes of the purchase of existing non-affordable housing, converting existing structures to affordable housing units, constructing new affordable housing, related land purchases, and the repair and renewal of existing affordable housing units.
CRA indicated that to the extent that the Government Assistance received by Aco was in respect of the acquisition of depreciable property (or land), s. 13(7.1) (or s. 53(2)(k)) will deem that amount to reduce the capital cost of the depreciable property (or land) – without any inclusion under s. 12(1)(x) pursuant to s.12(1)(x)(vi) and without any election required. In this regard, CRA noted:
[T]he expenditure of construction costs may be considered the acquisition of depreciable property that is a “building or structure”. Therefore, any part of the proceeds of the Government Assistance used by Aco to make capital expenditures (as opposed to current expenses) related to the construction of new affordable housing, or to convert existing buildings into affordable housing, may also reduce the cost of that property under subsection 13(7.1).